A company must set an initial price for new products or when entering new markets. There is a 5-step process: 1) Select a pricing objective like survival, maximum profit, or market share. 2) Determine demand through price sensitivity and demand curves. 3) Estimate costs like fixed, variable, and average costs. 4) Analyze competitors' prices and offers. 5) Select a pricing method like markup or target-return pricing and consider costs, competition, and customer value to set the final price. The main strategies are selecting the objective, determining demand, estimating costs, analyzing competition, selecting a method, and setting the final price.
Based on Kotler-Keller book about Marketing Management; this slides is all about Delivering Value.
The slides contents are:
- DESIGNING & MANAGING INTEGRATED MARKETING CHANNELS
- MANAGING RETAILING, WHOLESALING & LOGISTICS
New-Product Pricing Strategies
Product Mix Pricing Strategies
Price Adjustment Strategies
Price Changes
Market-skimming pricing is a strategy with high initial prices to “skim” revenue layers from the market
Product quality and image must support the price
Buyers must want the product at the price
Costs of producing the product in small volume should not cancel the advantage of higher prices
Competitors should not be able to enter the market easily
Market-penetration pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share
Price-sensitive market
Inverse relationship of production and distribution cost to sales growth
Low prices must keep competition out of the market
Analyzing Consumer Markets
What Influences Consumer Behavior?
What is Culture?
Subcultures
Fast Facts About American Culture
Social Classes
Characteristics of Social Classes
Reference Groups
Roles and Status
Personal Factors
The Family Life Cycle
Lifestyle Influences
Model of Consumer Behavior
Motivation
Maslow’s Hierarchy of Needs
Consumer Buying Process
Problem Recognition
Marketing Channels - Delivering Customer ValueFaHaD .H. NooR
Supply Chains and the Value Delivery Network
The Nature and Importance of Marketing Channels
Channel Behavior and Organization
Channel Design Decisions
Channel Management Decisions
Public Policy and Distribution Decisions
Marketing Logistics and Supply Chain Management
Upstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or service
Downstream partners include the marketing channels or distribution channels that look toward the customer
Product, Services, and Brands - Building Customer Value - MarketingFaHaD .H. NooR
What Is a Product?
Product and Services Decisions
Branding Strategy: Building Strong Brands
Services Marketing
A Product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want
Experiences represent what buying the product or service will do for the customer
Identifying Market Segments and Targets
Effective Targeting Requires
Four levels of Micromarketing
What is a Market Segment?
Flexible Marketing Offerings
Preference Segments
Segmenting Consumer Markets
Behavioral Segmentation
The Brand Funnel Illustrates Variations in the Buyer-Readiness Stage
Loyalty Status
Segmenting for Business Markets
Steps in Segmentation Process
Effective Segmentation Criteria
Based on Kotler-Keller book about Marketing Management; this slides is all about Delivering Value.
The slides contents are:
- DESIGNING & MANAGING INTEGRATED MARKETING CHANNELS
- MANAGING RETAILING, WHOLESALING & LOGISTICS
New-Product Pricing Strategies
Product Mix Pricing Strategies
Price Adjustment Strategies
Price Changes
Market-skimming pricing is a strategy with high initial prices to “skim” revenue layers from the market
Product quality and image must support the price
Buyers must want the product at the price
Costs of producing the product in small volume should not cancel the advantage of higher prices
Competitors should not be able to enter the market easily
Market-penetration pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share
Price-sensitive market
Inverse relationship of production and distribution cost to sales growth
Low prices must keep competition out of the market
Analyzing Consumer Markets
What Influences Consumer Behavior?
What is Culture?
Subcultures
Fast Facts About American Culture
Social Classes
Characteristics of Social Classes
Reference Groups
Roles and Status
Personal Factors
The Family Life Cycle
Lifestyle Influences
Model of Consumer Behavior
Motivation
Maslow’s Hierarchy of Needs
Consumer Buying Process
Problem Recognition
Marketing Channels - Delivering Customer ValueFaHaD .H. NooR
Supply Chains and the Value Delivery Network
The Nature and Importance of Marketing Channels
Channel Behavior and Organization
Channel Design Decisions
Channel Management Decisions
Public Policy and Distribution Decisions
Marketing Logistics and Supply Chain Management
Upstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or service
Downstream partners include the marketing channels or distribution channels that look toward the customer
Product, Services, and Brands - Building Customer Value - MarketingFaHaD .H. NooR
What Is a Product?
Product and Services Decisions
Branding Strategy: Building Strong Brands
Services Marketing
A Product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want
Experiences represent what buying the product or service will do for the customer
Identifying Market Segments and Targets
Effective Targeting Requires
Four levels of Micromarketing
What is a Market Segment?
Flexible Marketing Offerings
Preference Segments
Segmenting Consumer Markets
Behavioral Segmentation
The Brand Funnel Illustrates Variations in the Buyer-Readiness Stage
Loyalty Status
Segmenting for Business Markets
Steps in Segmentation Process
Effective Segmentation Criteria
This presentation is an introduction to the role of IMC in marketing.
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An attempt by Deboleena Dutta to adapt the Harvard Business Review article 'Three Questions you need to ask about brand' by Keller, Sternthal and Tybout in Indian context.
A brand's evolution analogous to Christ's crucifixion and hence, resurrection.
This presentation is an adaptation of 'A brand is forever! A framework for revitalizing declining and dead brands' by S. Thomas and C. Kohli (published in Harvard Business Review)
How should a company set prices initially for products or services?
1. HOW SHOULD A COMPANY
SET PRICES INITIALLY FOR
PRODUCTS OR SERVICES?
2. A firm must set a price for the first time when it develops a
new product, when it introduces its regular product into a
new distribution channel or geographic area, and
when it enter bids on new contact work.
4. STEP 1
Selecting the pricing objective.
The company first decides where it wants to position
its market offering.
5. STEP 1
Selecting the pricing objective.
The company first decides where it wants to position
its market offering.
There are 5 objectives to keep in mind.
7. SURVIVAL
Companies pursue survival as their major objective if they
are plagued with overcapacity intense competition, or
changing want.
Survival is a short-run objective; in the long run, the firm
must learn how to add value or face extinction.
8. MAXIMUM CURRENT
PROFIT
The company estimate the demand and costs associated
with alternative prices and choose the price that produces
maximum current profit, cash flow, or rate of return on
investment.
9. MAXIMUM CURRENT
PROFIT
The company estimate the demand and costs associated
with alternative prices and choose the price that produces
maximum current profit, cash flow, or rate of return on
investment.
However, this strategy is difficult to implement.
10. MAXIMUM MARKET
SHARE
Companies believe a higher sales volume will lead to lower
unit costs and higher long-run profit. They set the lowest
price assuming the market price is sensitive.
11. MAXIMUM MARKET
SHARE
Companies believe a higher sales volume will lead to lower
unit costs and higher long-run profit. They set the lowest
price assuming the market price is sensitive.
The following conditions need to be fulfilled first:
• The market is a highly price sensitive
12. MAXIMUM MARKET
SHARE
Companies believe a higher sales volume will lead to lower
unit costs and higher long-run profit. They set the lowest
price assuming the market price is sensitive.
The following conditions need to be fulfilled first:
• The market is a highly price sensitive
• Production costs fall with rise in production experience
13. MAXIMUM MARKET
SHARE
Companies believe a higher sales volume will lead to lower
unit costs and higher long-run profit. They set the lowest
price assuming the market price is sensitive.
The following conditions need to be fulfilled first:
• The market is a highly price sensitive
• Production costs fall with rise in production experience
• A low price discourages competition
14. MAXIMUM MARKET
SKIMMING
A pricing strategy by which a firm charges the highest initial
price that customers will pay.
As the demand of the first customers is satisfied, the firm
lowers the price to attract another, more price sensitive
segment.
15. PRODUCT QUALITY
LEADERSHIP
Many companies strive to be “affordable luxuries”; products
or services characterized by high levels of perceived quality,
taste and status with a price just high enough not to be out of
consumers’ reach
17. PRICE SENSITIVITY
Price sensitivity (also called price elasticity of demand) is the
degree to which price affects a consumer’s decision to
purchase a product or service.
18. PRICE SENSITIVITY
Customers are less price sensitive when:
• There are few or no substitutes or competitors
• They do not readily notice the higher prices
• They are slow to change their buying habits
• They think the higher prices are justified
• Price is only a small part of the total cost involved in
purchasing the product or service
19. ESTIMATING DEMAND
CURVES
Most companies attempt to measure their demand curves
using several different methods such as surveys, price
experiments & statistical analysis.
20. PRICE ELASTICITY OF
DEMAND
It is measured to show the responsiveness, or elasticity, of
the quantity demanded of a good or service to a change in its
price.
21. PRICE ELASTICITY OF
DEMAND
There is Elastic demand:
If a small change in price is accompanied by a large change
in quantity demanded, the product is elastic.
22. PRICE ELASTICITY OF
DEMAND
And there is inelastic demand:
If a change in price is accompanied by very little change in
quantity demanded, the product is inelastic.
24. CONSIDERING
DIFFERENT TYPES OF
COSTS
Fixed Costs
These are costs defined as expenses that do not change as a
function of the activity of a business, within the relevant
period.
For example, a retailer must pay rent & utility bills
irrespective of sales.
25. CONSIDERING
DIFFERENT TYPES OF
COSTS
Variable Costs
Those costs that vary depending on a company’s production
volume; they rise as production increases and vice versa.
Examples are rent, advertising, insurance & office supplies.
28. ACCUMULATED
PRODUCTION
The average cost pricing method, but using an estimate of
future average costs , based on accumulated production
creating an experienced learning curve.
29. TARGET COSTING
Target costing is a pricing method where overall cost of a
product is reduced over its entire life cycle with the help of
production, engineering, research and design.
30. STEP 4
Analyzing Competitor’s Costs, Prices &
Offers
Competitors are most likely to react when there is any price
change and when the number of firms is few, the product is
homogeneous, and buyers are highly informed.
Analyzing these reactions and consequent strategies can be
beneficial.
31. STEP 5
Selecting a Pricing Method
There are 3 major considerations in price setting:
• Costs set a floor to the price.
32. STEP 5
Selecting a Pricing Method
There are 3 major considerations in price setting:
• Costs set a floor to the price.
• Competitor’s prices and the price of substitutes provide
an orienting point.
33. STEP 5
Selecting a Pricing Method
There are 3 major considerations in price setting:
• Costs set a floor to the price.
• Competitor’s prices and the price of substitutes provide
an orienting point.
• Customer’s assessment of unique features etablishes the
price ceiling.
35. SELECTING A PRICING
METHOD
Keeping these three considerations in mind, these are the six
methods of pricing:
MARKUP PRICING
TARGET-RETURN PRICING
36. SELECTING A PRICING
METHOD
Keeping these three considerations in mind, these are the six
methods of pricing:
MARKUP PRICING
TARGET-RETURN PRICING
PERCEIVED-VALUE PRICING
37. SELECTING A PRICING
METHOD
Keeping these three considerations in mind, these are the six
methods of pricing:
MARKUP PRICING
TARGET-RETURN PRICING
PERCEIVED-VALUE PRICING
VALUE PRICING
38. SELECTING A PRICING
METHOD
Keeping these three considerations in mind, these are the six
methods of pricing:
MARKUP PRICING
TARGET-RETURN PRICING
PERCEIVED-VALUE PRICING
VALUE PRICING
GOING-RATE PRICING
39. SELECTING A PRICING
METHOD
Keeping these three considerations in mind, these are the six
methods of pricing:
MARKUP PRICING
TARGET-RETURN PRICING
PERCEIVED-VALUE PRICING
VALUE PRICING
GOING-RATE PRICING
AUCTION-TYPE PRICING
40. STEP 6
Selecting the Final Price
Pricing methods narrow the range from which the company
must select its final price.
In selecting that price, the company must consider additional
factors such as…….
45. SO TO RECAP….
The Main Strategies Of Pricing are:
Selecting the Pricing Objective
Determining Demand
Estimating Costs
Analyzing Competitor’s Costs, Prices and Offers
Selecting a Pricing Method
Selecting the Final Price
46. THANK YOU
.
Created by
Kunal Eapen, IIIT Allahabad
During an internship under
Prof Sameer Mathur, IIM Lucknow
www.iiminternship.com